Toby Eccles shares a bold idea — seeking private funds to tackle social problems through public services — at TEDGlobal. Since he gave this talk, his organization has started several new projects. Photo: James Duncan Davidson

Toby Eccles, whose talk about Social Impact Bonds was published yesterday, has been busy since he gave his talk at TEDGlobal in June. Eccles, founder of the nonprofit Social Finance, now spends about half his time on Development Impact Bonds, a spinoff of his original idea. Where SIBs seek private funders to invest in social causes, with payments made with public funds only if outcomes are successful, DIB payments are made by international development agencies. Host governments are still involved in the execution of projects — they’re just not responsible for paying investors.

Over the phone, Eccles told me about three early-stage projects that Social Finance is working on.

Social Finance is in discussions with the Department for International Development (DFID) to invest in a DIB to combat sleeping sickness in Uganda. Sleeping sickness, or African trypanosomiasis, is a parasitic disease that affects about 30,000 people a year worldwide. By injecting 4 million cows, this DIB aims to reduce the parasitic load. They hope to see the number of incidences in humans drop in turn.

Meanwhile in Worcester, England, Social Finance is working on a project to reduce isolation and loneliness for the elderly. The idea: Could focusing on the socialization of the elderly reduce their health problems?

Finally, says Eccles, his company is working on a project that supports families in need holistically. Traditionally, families are approached by many different government agencies for different needs (one agency for education, another for mental health, yet another for employment and for housing). Instead, Social Finance proposes a SIB that provides a pool of money for families based on their individual needs, then assesses their success based on the relevant improvements.

Meanwhile, the Peterborough Prison bond, a contract between the UK Ministry of Justice and Peterborough Prison in Cambridgeshire to lower rates of crime in 3,000 short-term prisoners, is still going strong. Early results, released this summer, showed a 23 percent reduction in re-offenses compared to the national baseline.

In a bold talk at TEDGlobal 2013, Toby Eccles shared how a marriage of private and public funds could be a win-win-win for the government, investors and populations in need of innovative social service programs, like those in prison or in the care of the state. In 2010, Eccles’ nonprofit — Social Finance — signed a contract with the UK’s Ministry of Justice to start a pilot program with 3,000 short-term prisoners at Peterborough Prison. If they succeed in lowering the group’s reoffense rate by 10 percent or more, investors stood to make money for every conviction saved.

Early yesterday afternoon, early results were published of the pilot. Though the program won’t finish until 2014, these early results are promising. According to Toby Eccles, whose talk describes launching the Peterborough pilot, the program showed a 23 percent decrease in reoffending rates. (Even though the year before also saw a rise in reoffending rates at large, he is quick to point out.) Justice Secretary Chris Grayling said of the program, it’s “the sort of approach I want to see rolled out to all offenders leaving prison.”

I caught up with Eccles at TEDGlobal to ask him more about his work and these early results.

Congrats on these results. What do these numbers mean for you?

A 23 percent reduction compared to the national baseline are good numbers by any stretch. It’s good news, but we need to be cautious. These are early numbers. This is seen in the national context of the government wanting to implement much wider changes, which are quite controversial. But from an early indication of whether this kind of mechanism can make a difference, it’s obviously tremendous news.

What services do you provide?

We provide a through-the-gate service: We work to meet and form relationships with the prisoners while still in prison. We help assess what their needs are at the time, and connect them to a set of services and elements that they need afterwards. Very often this is a matter of intensive intervention and building a relationship of trust with people who are often very cynical, having had previous services that are patchy or that disappear. So we have a number of prisoners who didn’t engage properly until they went through the system two or three times and realized: We’re not going away.

How do you explain to people what Social Finance’s role in this? How exactly do you make money from this?

We’re the enabler. We raise the business capital and performance manage the organizations doing the work. We also work with services to provide a data-driven way to constantly improve the service. We charge some capital raising fees and a modest management fee. We felt we wanted something that had an element of profit-sharing in it as well, so we get 10 percent of the upside after investors have gotten their capital back.

Who comes up with the proposals for the bonds?

We’re finding ideas coming from all parts: Governments and service-providers. (Investors not so much, though foundations do.) Over the years we’ve also seen the proposed ideas get more sophisticated as people understand the potentials and limitations of the model.

What are your plans for scaling?

With the Peterborough pilot, the MoJ has a great deal of interest in moving a payment-by-result mechanism across the whole of probation, therefore privatizing the whole of probation. That’s a much wider challenge linked to a cost-saving measure that’s part of the austerity package. It’s a complex landscape, and we have to see exactly where that lands to work out what our role, if any, there should be.

Toby Eccles doesn’t believe that the private and public sectors have to operate separately for social change. And he and his colleagues at Social Finance have been working since 2010 to prove it — with a new financial instrument known as social impact bonds. They are, as Eccles says, “not a new intervention, therapy or way of working with kids,” but a new way of doing business for social change.

Consider the problem of recidivism in short-sentence prisoners. In Britain, 63 percent of men who serve short prison sentences are expected to reoffend within a year. In fact, on average these men have committed 43 previous offenses and been to prison seven times before. Eccles and his team approached the Ministry of Justice and asked them: What is it worth to you — economically, in terms of police time, court time, prison time, etc. — to have these men reoffend fewer times? The social benefits are important, but it’s the economic value that makes the case truly compelling and irrefutable, says Eccles. And more important, if Social Finance and the Ministry could agree on how to measure progress, including a dollar value that demonstrates that progress, they could agree on a contract.

In a social impact bond, socially motivated private investors put up funds to pay for services, and the government pays up if progress happens. If the outcome improves and the agreed-upon measures are met, then the public department pays the money saved (from court time, prison time, etc.) back to the investors, who get their money back plus returns. If the outcome doesn’t improve, investors lose their investment — but the government doesn’t. It’s win-win-win: Investors can invest in social change (and Eccles says, “A surprising number of people want to invest in something that produces social good.”) and get a reasonable return; service providers have a chance to increase the evidence for their efficacy and demonstrate the value of their service; and the government benefits because it saves money. And society isn’t doing too badly, either.

Photo: James Duncan Davidson

Social impact bonds encourage:

1. Innovation: The public sector, which is usually under financial constraints that don’t allow it to innovate, can take bigger risks.
2. Rigor: Since the outcomes are agreed upon from the beginning, data-gathering is built in to the plan.
3. Flexibility: The first draft of a business plan often fails, but these plans are adaptive from the start and change depending on the cause.
4. Partnership: Social impact bonds marry public funds, private funds and socially motivated services.

Social Finance signed a contract with the Ministry of Justice in 2010 to start a program with 3,000 offenders at Peterborough Prison. If they succeed in lowering the conviction rate by 10 percent or more, Social Finance will make money for every conviction saved. As Eccles told me separately, early results will be published tomorrow, June 13. If all goes well, the future of public and private funds for social impact is looking up.

UPDATE: Early results from the middle of the Peterborough prison pilot have been published. — June 13, 2013

]]>http://blog.ted.com/a-marriage-of-private-and-public-investments-for-social-good-toby-eccles-at-tedglobal-2013/feed/2TG2013_033459_D41_1559thuhaTG2013_033815_DSC_3054TG2013_033458_D41_1558Money Talks: The speakers in session 4 at TEDGlobal 2013http://blog.ted.com/money-talks-the-speakers-in-session-4-at-tedglobal-2013/
http://blog.ted.com/money-talks-the-speakers-in-session-4-at-tedglobal-2013/#commentsWed, 12 Jun 2013 12:20:24 +0000http://blog.ted.com/?p=76311[…]]]>In the immortal words of the Wu-Tang Clan, “Cash rules everything around me.” Then again, as Benjamin Franklin put it, “A penny saved is a penny earned.” So how are we to parse this thing — money — which shapes so much of our lives? This session will make you think again about economics, taking a deep look at how cash flow effects individuals, countries and where we’re headed in the future.

Here are the speakers who took the stage during this session of TEDGlobal 2013. Click their name for a full recap of their talk:

In “Plutocrats,” Chrystia Freeland explores the growing gap between the working poor and the increasingly disconnected mega-rich.